What Is a New York Money Transmitter Bond?
If you want to launch a New York money transmitter business, you have to obtain a state license from the Department of Financial Services. One of its indispensable requirements is to post a money transmitter bond.
What is the purpose of getting this bond? The state imposes this licensing criterion in order to provide an extra layer of security for the general public. The bond is there to guarantee your legal compliance and thus protect the interests of your customers.
Just like other surety bonds, this money transmitter bond works as a contract between three entities. The principal is your money transmitting company. The Department of Financial Services is the obligee that requires the bond. The bond is provided by the surety.
Questions about Money Transmitter Bonds in New York
In which cases do I need to obtain this bond?
Every money transmitter in New York has to get licensed. You have to undergo the process through the Nationwide Multistate Licensing System and Registry (NMLS). The Department of Financial Institutions requires you to meet a number of requirements, including to post a $500,000 surety bond. You have to provide it in the official bond form. Its purpose is to ensure your compliance with the New York State Banking Law.
What is the New York money transmitter bond cost?
For obtaining a New York money transmitter license, you have to post a surety bond of $500,000. This is the required bond amount, which is different from your bond premium. It is only a fraction of the required amount, which typically can range between 1% and 5%, depending on the financial strength of the business and ownership.
Your surety bond cost is determined through a careful consideration of a couple of factors. The surety that you apply with will need to examine your the business owner’s personal credit score, as well as review the business’ audited business financials, as the bond amount for New York is considerable. Some underwriters may also request a review of the owner’s personal financial statement or cash verification.
It may also consider your assets and liquidity, and even professional experience. On the basis of these criteria, it can assess the level of bonding risk involved. The bond cost you get will be lower if your profile is solid.
Factors that can impact bond cost are:
Financial strength of the business
Personal finances of the ownership
Credit profile of business owners
- Type of currency being handled (i.e. cryptocurrency, etc.)
Is it possible to get bonded with bad credit?
It may be possible to obtain this bond if you have less than perfect credit. However, the business and personal financial statements will have to be strong enough for a surety underwriter to feel comfortable extending $500,000 in surety credit to your business. For a bond of this size, strong credit is often a prerequisite, while audited business financials will be the primary basis for an approval or declination.
How do I apply for a bond?
For further details, you can check our How to Get Bonded page. It is an extensive guide that will inform you about the intricacies of the bonding process.
Need more help? Just call us at (877) 514-5146. Lance Surety Bonds’ specialists will gladly assist you.
How are bond claims handled for money transmitters?
The purpose of your New York money transmitter bond is to protect the state and its citizens against potential illegal, fraudulent or unethical actions you may undertake in your profession. It can serve as a mechanism for providing a fair compensation to parties who have suffered damages as a result of that. This can be done via a claim against the bond.
Claimants can demand a reimbursement up to the penal sum of the bond, which is $500,000. As per the bond indemnity agreement, you are liable for all claim costs. The surety may cover them at first, but you have to repay it afterwards. Thus, it’s best to avoid claims, as they can be costly and harmful for your business.